Global Economics

Blackstone's Travelport Said to be Preparing $3.2B IPO

December 18, 2009

The reservations company looks to a London IPO as the travel market stabilizes, according to people familiar with plans

By Ambereen Choudhury, Jason Kelly and Elisa Martinuzzi

(Bloomberg) — Travelport Ltd., the travel reservation company owned by investors including Blackstone Group (BX), is planning a 2 billion-pound ($3.2 billion) initial public offering, said three people familiar with the matter.

Barclays Capital, Credit Suisse Group AG, UBS AG, Deutsche Bank AG and Citigroup Inc. were hired to advise on the share sale, slated to take place in London as early as February, said the people, who declined to be identified because the plans haven't been announced.

Leveraged buyout firms are seizing on the 62 percent rebound in the Standard & Poor's 500 Index from a 12-year low in March to return cash to investors. Blackstone led a group that bought New York-based Travelport from Cendant Corp. for $4.3 billion in 2006. Travelport owns 48 percent of online booking company Orbitz Worldwide (OWW) as well as the Galileo and Worldspan brands.

"The big picture is the travel market has stabilized and is looking like it's ready to go up," said Michael Millman, founder of Millman Research Associates, who recommends buying Orbitz and Expedia (EXPE) shares. "Travelport has basically said they want to do an IPO at the right time, meaning when they can get a good price."

Buyout firms are counting on IPOs to exit some of the $2 trillion in leveraged-buyouts they have made since the start of 2004. Distributions to clients fell by two-thirds to $63 billion in 2008 from the previous year, according to London-based researcher Preqin Ltd., as the worst financial crisis since the Great Depression stymied deal making.

Blackstone President Tony James told investors on Nov. 6. that the world's largest private-equity company would take advantage of the market rally to pare debt in its companies and deliver profits to investors. The firm may sell shares in as eight companies it owns, Chief Executive Officer Stephen Schwarzman said last month.

Travelport's IPO comes as companies in the industry lure more customers with discounts.

Travelport reported third-quarter revenue of $570 million, down from $634 million a year ago. The company operates across 160 countries and has about 5,300 employees with revenues of $2.5 billion in 2008.

Travelport had about $3.7 billion of on-balance-sheet debt as of Sept. 30, down from a peak of $4.6 billion in the middle of 2007, according to Standard & Poor's. The company changed terms on its loans, allowing it to sell shares outside the U.S., S&P's LCD said on Dec. 2.

Other Travelport investors include Palo Alto, California- based Technology Crossover Ventures; One Equity Partners, the private-equity unit of JPMorgan Chase & Co.(JPM); and Travelport's managers, according to company statements. Rebecca Hurst, a spokeswoman for Technology Crossover, declined to comment on Travelport, as did JPMorgan's Tasha Pelio.

IPO Price Cuts

IPOs are rebounding after a drought when credit markets froze after the collapse of New York-based Lehman Brothers Holdings Inc. in the fourth quarter of last year. Thirty-two companies have completed IPOs since September, compared with 47 in all of 2009, data compiled by Bloomberg show.

Private equity-led offerings have suffered setbacks this month in both Europe and the U.S.

Gartmore Group Ltd., the money manager controlled by San Francisco-based private-equity firm Hellman & Friedman LLC, sold shares last week for 33 percent less than the highest price the London-based company initially sought.

Investors also extracted price cuts of more than 20 percent from three private equity-backed IPOs in the U.S. this week. TPG of Fort Worth, Texas sold a stake in Kraton Performance Polymers Inc. for less than it paid to buy the Houston-based chemical maker. Carlyle Group in Washington accepted 21 percent less than it sought for Cobalt International Energy Inc., a Houston-based oil explorer with no revenue or profit, and Blackstone took a lower price in the IPO of Knoxville, Tennessee-based Team Health Holdings Inc.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net; Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net